Tuesday, January 08, 2013

WCE Concession Revision: Not Good Enough!


The revision of the West Coast Expressway agreement proves the power of Pakatan Rakyat checks and balances but still falls short of ensuring that the interest of the man-on-the-street are fully protected

Exactly a year ago in January 2012, I had called upon Datuk Seri Najib Razak to justify how the cost of the West Coast Expressway (WCE) increased by 134% from RM3.015 billion to RM7.07 billion while its concession period also nearly doubled extended from 33 to 60 years between 2007 and 2012.

The concessionaire, Kumpulan Europlus (KEURO) Bhd who failed to carry out the project in 2007 was further given new additional benefits where the Government will grant WCE a RM2.24 billion soft loan at 4% interest and an interest subsidy, of up to 3% from commercial loans for a period of 22 years.  The land acquisition cost amounting to RM980 million will also be borne by the Government.

However, despite the barrage of criticisms from myself and other Pakatan Rakyat leaders, Datuk Seri Najib Razak who oversees the privatisation department remained completely silent.  He failed to explain the increase in the burden to the government to support the private concessionaire, and more importantly, he failed to carry out his transformation promise of “transparency, open-tenders and accountability”.

The “good” news however, was that further negotiations was carried out between the concessionaire and the Government.  The outcome was that the cost of the highway was “shrunk”  by 26.4% to RM5.2 billion, even though this is still 72.5% higher than the original RM3.015 billion.  In addition, the Government also scrapped the 3% interest subsidy for commercial loans taken by the concessionaire.  The Edge Financial Daily also reported that there will be an early termination clause if the concessionaire generates higher than expected returns and was about to recoup its cost earlier.

The above “improvements” to the contract was only possible because of the scrutiny by Pakatan Rakyat, “saving” the people of billions of ringgit in tax-payers funds.

However, despite the improvement, the new deal still falls far short of what would be in line with the promises made by the Prime Minister under the Government Transformation Programme (GTP).

First of all, the RM5 billion ringgit contract is still directly negotiated with a company which generated only RM19.8 million and RM27.7 million in revenues in its financial year 2012 and 2011 respectively.  The company’s cash pile stood at a miserable RM1.03 million, bare 0.2% of the required capital to carry out the project.  Without a competitive tender, there is absolutely no way of telling if the Rakyat are still substantially over-paying for the highway, especially when it’s awarded to KEuro, a company without the necessary track record.

Why did Najib not take the past 12 months to carry out an open and competitive tender to obtain the best value for tax-payers’ monies?  What is so specialy about this RM19.8 million company that the Government must die-die give them the contract?

Secondly, the Government has failed to be transparent in the award because it has steadfastly refused to disclose the terms of the agreement.  The terms of the agreement are crucial as it will determine the benchmarks set for the cost of the highway, the toll rates to be charged, the details of the proposed profit-sharing formula as well as the rate of return defined for the early termination clause.  As the saying goes, the devil is in the details. Without the above details, there is no way of telling if the Government is signing another agreement loaded in the favour of the concessionaire as it has done in the past or if the rakyat are substantially protected.

A Pakatan Rakyat government will promise to not only carry out open, competitive and transparent tenders for all procurement and privatisation projects, we will ensure that all contracts with concessionaires are made publicly accessible for thorough scrutiny.

When the Penang state government awarded the Penang People’s Park and Subterranean Penang International Convention Exhibition (sPICE) public-private partnership project 15 months ago, it was awarded via open and competitive tenders.  However, what made the Pakatan Rakyat government shine was the fact that the concession agreement was public.

Hence we call upon the Najib’s so-called “transformation government” to learn from the Pakatan Rakyat state governments as well as our manifesto to ensure open and competitive tenders for all projects as well as declassifying all government concession and procurement contracts to ensure transparency and eliminate corruption and abuse of power.
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